Explaining African Economic Performance

Africa has had slow growth and a massive exodus of capital. In many respects it has been the most capital-hostile region. We review and interpret the aggregate-level and microeconomic literatures to identify the key explanations for this performance. There is a reasonable correspondence of the two sets of evidence, pointing to four factors as being important. These are a lack of openness to international trade; a high-risk environment; a low level of social capital; and poor infrastructure. These problems are to a substantial extent attributable to government behavior, and the paper includes a review of the political economy literature addressing that behavior.

[1]  A. Yeats.  On the accuracy of economic observations : do sub-Saharan trade statistics mean anything? , 1990 .

[2]  T. Killick.  Principals, Agents and the Limitations of BWI Conditionality , 1996 .

[3]  Nelson C. Mark,et al.  The Relative Importance of Political and Economic Variables in Creditworthiness Ratings , 1998, SSRN Electronic Journal.

[4]  S. Migot-Adholla.  Indigenous land rights systems in sub-Saharan Africa : a constraint on productivity? , 1991 .

[5]  J. Gunning,et al.  Rates of Return on Physical and Human Capital in Africa ' s Manufacturing Sector , 1997 .

[6]  Stefan Dercon,et al.  Income portfolios in rural Ethiopia and Tanzania: choices and constraints , 1996 .

[7]  J. Hoddinott.  Wages and Unemployment in an Urban African Labour Market , 1996 .

[8]  P. Collier,et al.  Crop Sales, Shortages and Peasant Portfolio Behaviour: An Analysis of Angola , 1994 .

[9]  John Knight,et al.  Earnings, Schooling, Ability, and Cognitive Skills , 1985 .

[10]  M. Odedokun.  Foreign Creditors' Perception of Risks in Lending to African Countries: Evidence from Interest‐Rate Spread , 1996 .

[11]  John McIntire,et al.  Behavioral and Material Determinants of Production Relations in Land-Abundant Tropical Agriculture , 1987, Economic Development and Cultural Change.

[12]  P. Collier,et al.  Labour and Poverty in Kenya: 1900 - 1980 , 1986 .

[13]  Christopher Udry,et al.  Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria , 1994 .

[14]  J. Gunning,et al.  Income and Substitution Effects in Models of Peasant Supply Response under Rationing. , 1991 .

[15]  A. Vos.  The African Environment , 1975 .

[16]  J. Gunning,et al.  War, peace and private portfolios , 1995 .

[17]  J. Weeks,et al.  Africa Misunderstood: or Whatever Happened to the Rural-Urban Gap? , 1993 .

[18]  Jonathan R.W. Temple,et al.  Initial Conditions, Social Capital and Growth in Africa , 1998 .

[19]  A. Greif,et al.  Organizing Violence: Wealth, Power, and Limited Government , 2000 .

[20]  J. Newman,et al.  Wage Rigidity: Micro and Macro Evidence on Labor Market Adjustment in the Modern Sector , 1989 .

[21]  J. Gunning,et al.  Peasants and Governments: An Economic Analysis , 1991 .

[22]  D. Greenaway,et al.  Tax revenue instability, with particular reference to sub‐Saharan Africa , 1995 .

[23]  Michael Sarel,et al.  Nonlinear Effects of Inflation on Economic Growth , 1995, SSRN Electronic Journal.

[24]  Risk and Private Investment: Africa Compared with Other Developing Areas , 2000 .

[25]  D. Rodrik.  Trade Policy and Economic Performance in Sub-Saharan Africa , 1998 .

[26]  Victor Lavy.  Quality and Cost in Health Care Choice in Developing Countries , 1994 .

[27]  J. Platteau.  Behind the market stage where real societies exist ‐ part I: The role of public and private order institutions , 1994 .

[28]  John R. Harris,et al.  Migration, Unemployment & Development: A Two-Sector Analysis , 1970 .

[29]  L. Pritchett.  Measuring real exchange rate instability in developing countries : empirical evidence and implications , 1991 .

[30]  S. Wangwe,et al.  Labour and poverty in rural Tanzania , 1986 .

[31]  J. Craig.  Comparative African Experiences in Implementing Educational Policies , 1990 .

[32]  D. Rimmer,et al.  Staying poor: Ghana's political economy, 1950-1990 , 1992 .

[33]  Stefan Dercon,et al.  Wealth, risk and activity choice: cattle in Western Tanzania , 1998 .

[34]  Jean Ensminger.  Changing Property Rights: Reconciling Formal and Informal Rights to Land in Africa , 1997 .

[35]  A. Velenchik.  Government intervention, efficiency wages, and the employer size wage effect in Zimbabwe , 1997 .

[36]  A. Hoffmaister,et al.  North-South Trade: Is Africa Unusual? , 1998, SSRN Electronic Journal.

[37]  H. Rempel.  Adjustment in Africa: Reforms, Results, and the Road Ahead , 1995 .

[38]  L. Pritchett,et al.  Sociability : Household Income and Social Capital in Rural Tanzania , 1999 .

[39]  J. Gunning,et al.  Trade Policy and Regional Integration: Implications for the Relations between Europe and Africa , 1995 .

[40]  Christophe Chamley,et al.  Taxation of financial intermediation : measurement principles and application to five African countries , 1990 .

[41]  W. Jones.  Economic Man in Africa , 1960 .

[42]  J. Gunning,et al.  The export orientation of African manufacturing. A firm-level analysis , 1997 .

[43]  D. Dollar,et al.  Aid, Policies, and Growth , 1997 .

[44]  J. Knight.  Education, Productivity, and Inequality: The East African Natural Experiment , 1990 .

[45]  Angus Deaton,et al.  Saving and Income Smoothing in Côte d'Ivoire , 1992 .

[46]  Joseph E. Stiglitz,et al.  Alternative Theories of Wage Determination and Unemployment in LDC's: The Labor Turnover Model , 1974 .

[47]  A. Anas,et al.  Manufacturers'responses to infrastructure deficiencies in Nigeria: private alternatives and policy options , 1989 .

[48]  N. Fisher.  Studies in Mixed Cropping. III. Further Results with Maize-Bean Mixtures , 1979, Experimental Agriculture.

[49]  J. Gunning,et al.  Rates of Return on Physical and Human Capital in Africa's Manufacturing Sector , 2000, Economic Development and Cultural Change.

[50]  Patricia Jones.  Are manufacturing workers really worth their pay , 1994 .

[51]  David K. Leonard.  Reaching the Peasant Farmer: Organization Theory and Practice in Kenya , 1977 .

[52]  Ajay Chhibber,et al.  Economic Reform in Sub-Saharan Africa , 1992 .

[53]  David C. Wheeler.  Sources of stagnation in sub-Saharan Africa , 1984 .

[54]  S. Devarajan.  Membership in the CFA zone : Odyssean journey or Trojan horse? , 1990 .

[55]  A. Oswald,et al.  The Wage Curve , 1989 .

[56]  G. Mwabu,et al.  Quality of Medical Care and Choice of Medical Treatment in Kenya An Empirical Analysis , 1993 .

[57]  T. Reardon,et al.  Drought impact and household response in East and West Africa , 1992 .

[58]  E. Swanson,et al.  A new database on human capital stock in developing and industrial countries: Sources, methodology, and results , 1995 .

[59]  F. Teal.  The Size and Sources of Economic Rents in a Developing Country Manufacturing Labour Market , 1996 .

[60]  T. Grennes,et al.  The real exchange rate and macroeconomic performance in Sub-Saharan Africa , 1993 .

[61]  N. Gemmell.  Evaluating the impacts of human capital stocks and accumulation on economic growth: some new evidence. , 2009, Oxford bulletin of economics and statistics.

[62]  J. Gunning,et al.  Coping with drought in Zimbabwe: Survey evidence on responses of rural households to risk , 1998 .

[63]  J. Isham,et al.  The Forgotten Rationale for Policy Reform: The Productivity of Investment Projects , 1995 .

[64]  A. Deaton,et al.  International Commodity Prices, Macroeconomic Performance, and Politics in Sub-Saharan Africa , 1996 .

[65]  P. Collier.  The political economy of ethnicity , 1998 .

[66]  M. Hadjimichael,et al.  Growth in Sub-Saharan Africa , 1995, SSRN Electronic Journal.

[67]  D. Norse,et al.  African agriculture: the next 25 years. Atlas of African agriculture , 1986 .

[68]  D. K. Fieldhouse,et al.  Staying Poor: Ghana's political economy, 1950–1990 , 1993 .

[69]  P. Collier,et al.  Investment and Risk in Africa , 2000 .

[70]  J. Gunning,et al.  Controlled Open Economies: A Neoclassical Approach to Structuralism , 1994 .

[71]  T. Besley.  Property Rights and Investment Incentives: Theory and Evidence from Ghana , 1995, Journal of Political Economy.

[72]  J. Sachs,et al.  Sources of Slow Growth in African Economies , 1997 .

[73]  Robert J. Barro,et al.  Losers and Winners in Economic Growth , 1993 .

[74]  G. Helleiner.  The IMF, the World Bank and Africa's adjustment and external debt problems: An unofficial view , 1992 .

[75]  Stephen F. Knack,et al.  INSTITUTIONS AND ECONOMIC PERFORMANCE: CROSS‐COUNTRY TESTS USING ALTERNATIVE INSTITUTIONAL MEASURES , 1995 .

[76]  Stefan Dercon,et al.  Risk, Crop Choice, and Savings: Evidence from Tanzania , 1996, Economic Development and Cultural Change.

[77]  J. Oehmke,et al.  The Impact of Agricultural Technology in Sub-Saharan Africa: A Synthesis of Symposium Findings , 1996 .

[78]  M. Fafchamps,et al.  LPA Brief no. 13. The spatial integration of livestock markets in Niger , 1996 .

[79]  J. Spengler.  Natural resources and economic growth , 1962 .

[80]  John H. Cleave,et al.  African Farmers : Labor Use in the Development of Smallholder Agriculture , 1974 .

[81]  Diéry Seck,et al.  Financial liberalization in Africa , 1993 .

[82]  Sunil K. Sharma,et al.  Private Capital Flows to Sub-Saharan Africa: An Overview of Trends and Determinants , 1997 .

[83]  A. Deaton,et al.  Saving in Developing Countries: Theory and Review , 1989 .

[84]  J. Azam,et al.  The Supply of manufactured goods and agricultural development , 1988 .

[85]  M. Fafchamps.  The enforcement of commercial contracts in Ghana , 1996 .

[86]  R. Bates.  Capital, Kinship and Conflict: The Structuring Influence of Capital in Kinship Societies , 1990 .

[87]  J. Berthélemy,et al.  Manufactured goods supply and cash crops in sub-Saharan Africa☆ , 1987 .

[88]  J. Knight,et al.  Public Sector Employment, Rent Seeking and Economic Growth , 1991 .

[89]  B. Bosworth,et al.  Economic Growth in East Asia: Accumulation versus Assimilation , 1996 .

[90]  J. Gunning,et al.  What drives investment? Panel data evidence from industrial firms in Zimbabwe , 1996 .

[91]  J. Gunning,et al.  Money creation and financial liberalization in a socialist banking system: Tanzania 1983-88 , 1991 .

[92]  R. Reinikka,et al.  Do Budgets Really Matter? Evidence from Public Spending on Education and Health in Uganda , 1998 .

[93]  S. Dercon.  On Market Integration and Liberalisation: Method and Application to Ethiopia , 1995 .

[94]  J. Gunning,et al.  Inventories, Liquidity, and Contractual Risk in African Manufacturing , 1997 .

[95]  David L. Dollar.  Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976-1985 , 1992, Economic Development and Cultural Change.

[96]  Jean-Philippe Platteau,et al.  Halting degradation of natural resources: is there a role for rural communities? , 2000 .

[97]  E. Aryeetey,et al.  Financial Integration and Development: Liberalization and Reform in Sub-Saharan Africa , 1998 .

[98]  W. Easterly,et al.  Africa's Growth Tragedy: Policies and Ethnic Divisions , 1997 .

[99]  J. Gunning,et al.  Peasant supply response in rationed economies , 1987 .

[100]  A. Giovannini,et al.  Government Revenue from Financial Repression , 1991 .

[101]  A. Amjadi,et al.  Have transport costs contributed to the relative decline of sub-Saharan African exports? Some preliminary empirical evidence , 1999 .

[102]  J. Sachs,et al.  Geography and Economic Growth , 1998 .

[103]  R. Bates,et al.  Political institutions and economic growth in Africa , 1997 .

[104]  A. Harrison.  The Economics of Rural Organization: Theory, Practice and Policy . Edited by K. Hoff, A. Braverman and J. E. Stiglitz. Oxford: Oxford University Press (for the World Bank†) (1993), pp. 590, £53.95, US$59.95. ISBN 0-19-520888-9. , 1995, Experimental Agriculture.

[105]  R. Reinikka.  The Credibility Problem in Trade Liberalisation: Empirical Evidence from Kenya , 1996 .

[106]  T. Oshikoya.  Macroeconomic Determinants of Domestic Private Investment in Africa: An Empirical Analysis , 1994, Economic Development and Cultural Change.

[107]  J. Gunning,et al.  Trade Liberalization and Regional Integration in Zimbabwe , 1999 .

[108]  A. Hoffmaister,et al.  North-South Trade; Is Africa Unusual? , 1998 .

[109]  R. Bates.  Essays on the political economy of rural Africa , 1984 .

[110]  K. Schmidt-Hebbel,et al.  Macroeconomic Policies, Instability and Growth in the World , 1998 .

[111]  C. Burger.  Farm households, cash income and food production: the case of Kenyan smallholdings. , 1994 .

[112]  T. Pinckney,et al.  Land Tenure Reform in East Africa: Good, Bad, or Unimportant? , 1994 .

[113]  J. Gunning,et al.  Social learning: an application to Kenyan agriculture , 1993 .

[114]  J. Gunning,et al.  Price Controls And The Transition To Market Clearing: Theory And An Application To Tanzania , 1990 .

[115]  Carl K. Eicher,et al.  Research on Agricultural Development in Sub-Saharan Africa: A Critical Survey , 1982 .

[116]  F. Førsund,et al.  The Zambian RPED study : final report - round three , 1996 .

[117]  S. Dercon.  Peasant Supply Response and Macroeconomic Policies: Cotton in Tanzania , 1993 .

[118]  M. Roberts.  What Makes Exports Boom , 1997 .

[119]  H G McQuarrie.  Quality and cost. , 1978, JAMA.

[120]  L. Pritchett.  Where Has All the Education Gone? , 1996 .

[121]  Thorvaldur Gylfason.  Natural resources and economic growth , 1999 .

[122]  T. Reardon,et al.  Determinants and effects of income diversification amongst farm households in Burkina Faso , 1991 .

[123]  M. Hadjimichael,et al.  Public Policies and Private Savings and Investment in Sub-Saharan Africa: An Empirical Investigation , 1995, SSRN Electronic Journal.

[124]  R. Bates.  Markets and states in tropical Africa , 1981 .

[125]  Richard A. Posner,et al.  A Theory of Primitive Society, with Special Reference to Law , 1980, The Journal of Law and Economics.

[126]  A. Garg,et al.  On Kin Groups and Wages in the Ghanaian Labour Market , 1999 .

[127]  C. Lutz.  The functioning of the maize market in Benin: spatial and temporal arbitrage on the market of a staple food crop. , 1994 .

[128]  D. Rimmer.  Peasants and Governments: An Economic Analysis , 1991 .

[129]  G. Helleiner.  Outward Orientation, Import Instability and African Economic Growth: an Empirical Investigation , 1986 .

[130]  C. Udry.  Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy , 1990 .

[131]  J. Gunning,et al.  The manufacturing sector in Zimbabwe : industrial change under structural adjustment , 1995 .

[132]  D. Fielding.  Determinants of Investment in Kenya and Cote d'Ivoire , 1993 .

[133]  M. Bagachwa,et al.  The second economy in Tanzania , 1990 .

[134]  C. Morrisson,et al.  Adjustment Programmes and Politico-Economic Interactions in Developing Countries: Lessons from an Empirical Analysis of Africa in the 1980s , 1994 .

[135]  Marcel Fafchamps,et al.  Drought and Saving in West Africa: Are Livestock a Buffer Stock? , 1996 .

[136]  J. Sachs,et al.  Economic Reform and the Process of Global Integration , 1995 .

[137]  J. Craig.  Comparative African Experiences in Implementing Educational Policies. World Bank Discussion Papers No. 83. Africa-Technical Department Series. , 1990 .

[138]  J. Mayer,et al.  Africa's Export Structure in a Comparative Perspective , 1998 .

[139]  A. Greif.  Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition , 1993 .

[140]  Robert G. King,et al.  Finance, entrepreneurship and growth , 1993 .

[141]  W. Easterly,et al.  Troubles with the neighbours: Africa's problem, Africa's opportunity , 1998 .

[142]  T. Reardon,et al.  Coping with household-level food insecurity in drought-affected areas of Burkina Faso , 1988 .